Speaking before the town council and members of the community in council chambers, Glickman drew a bleak picture of the state's economic outlook and its impact on the town.

The state is facing a $25 billion deficit and has indicated it will take funds from vehicle licensing fees and local property taxes from cities.

Los Gatos could lose as much as $1.8 million from a reduction in vehicle licensing fees alone. The town's property tax may also be in jeopardy, with a potential loss of $400,000, Glickman said.

However, he maintained that the town was prepared for these fiscal challenges.

"We remain on solid ground during these tough times because we were prudent during the good times," he said. The town set aside some of its surplus money during the boom years, raising $10.9 million in funds.

Despite this fund, projections for the 2004­05 fiscal year indicate a $1.4 million shortfall in town funds, and Glickman warned that residents would probably see reductions in town services. Shorter library hours and longer response times by police to nonemergency situations may be among potential cuts.

But uncertainty at the state level has made it difficult to determine the exact nature of these cutbacks.

"The real challenge is in predicting the depth and duration of the current economic downturn," Glickman said. "If they are temporary, then it's appropriate to use some combination of year-end savings and part of our reserves to bridge us over the downturn."

"But if these changes for the fiscal picture are more permanent in nature, then it is not wise to spend our reserves to postpone the inevitable."

To this end, Glickman said the town has prepared two scenarios, one with a 6 percent and the other with a 12 percent reduction, for review at a special budget session Feb. 24.

The town would seek out new sources of revenue to help compensate for the shortfall, he added. One possibility to generate new funds: a higher fee for developers in Los Gatos.

Glickman also asked residents to support their town during these tough times, buoying the local economy by shopping and dining in Los Gatos. Sales tax is an important source of revenue for Los Gatos; the town receives 1 cent for every taxable dollar spent in Los Gatos.

"We are going to remind the Los Gatos community to shop Los Gatos. Whether you are buying a car or a tank of gas for that car, we will encourage Los Gatos residents to buy in Los Gatos."

Glickman also extended this encouragement to neighboring residents and out-of-town travelers, saying that the council would step up its efforts to target these potential customers.

In addition to pushing for increased shopping and dining traffic in Los Gatos, Glickman said he would urge more homebuyers to look at Los Gatos. He plans on working with local Realtors to facilitate home purchases in the area.

"Positive or negative, I want to hear what the Realtors are hearing," he said.

Beyond the numbers, Glickman focused on a broader vision for the future of Los Gatos.

Specifically, he pointed to Los Gatos' youth as one of the town's greatest assets.

"They are one of the main reasons our town is such a desirable place to live," he said. Glickman announced that the town council would work to foster better lines of communication between the town and its youth and would develop a youth commission this year.

"The voices that advocate for our young people must be the voices of our young people," he said.

Glickman concluded his speech by referring to the town as a "shining town on a hill."

"The state of our town is strong," he said. "We have challenges, which we will meet. We have joy, which we will share. And we will do these things together."